Best and worst: Income Trusts

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The Independent Online
INVESTING money in the high-income funds run by a number of well-known management companies may not give returns as good as one might expect, according to research from a firm of unit trust brokers based in Bristol.

Premier Unit Trust Brokers has carried out an annual study of income funds for the past 18 years. By its complex formula, Jupiter Merlin, Perpetual and Credit Suisse led the top performers followed by the likes of Morgan Grenfell, M&G, Newton and Schroder. Getting short shrift by Premier's calculations are such fund managers as Life Association of Scotland, Save & Prosper, Fidelity and Hypo Foreign & Colonial, Standard Life, Lloyds and MGM.

The research comes as many savers face low interest rates and are increasingly tempted to invest in higher- yielding funds with better growth prospects.

Peter Edwards, a partner at Premier, said: 'Why settle for 3 or 4 per cent net from a building society when dividend yields alone can be higher with many income unit trust PEPs? What's more, the unit trusts themselves can grow in value, preserving the value of the investment in real terms.'

Every year, Premier uses a complicated series of mathematical measures to work out the relative placing of each of the 118 income funds. The figures used to assess overall ranking this year included dividend growth in the four years to January 1994, plus total returns - capital growth plus net dividends - over one, three and five years. Finally, dividend yield in the year to January was also used.

Although annual yield is important, it is not the only measure used in the equation.

Mr Edwards said: 'There may be companies which, in one area alone, come top. By using all the different figures, we try to present a more balanced weighting.

'We rank all the funds by overall merit, and select the top 12 for our 'white list'. The remainder go on to our 'grey list', while the bottom 12 funds are in our 'black list'.

Virtually all the top income funds, apart from Jupiter Merlin's, can be sheltered in a personal equity plan (PEP), giving them additional tax-free advantages.

------------------------------------------------------------------------ INCOME TRUSTS: OVERALL PERFORMANCE ------------------------------------------------------------------------ The best Yield % 1 Jupiter Merlin 3.98 2 Perpetual High Income 3.91 3 Credit Suisse (was Buckmaster) 3.14 4 GT Income 4.88 5 Eagle Star High Income 4.65 The worst 114 Hypo F&C Income 4.96 115 Save & Prosper High Yield 3.47 116 Fidelity Income Plus 3.80 117 LAS Extra Income 3.32 118 Save & Prosper High Return 3.32 ------------------------------------------------------------------------ Figures above are yields over one year to January 1 1994 and do not represent the rankings under the Premier computations ------------------------------------------------------------------------ Source: Premier Unit Trust Brokers. ------------------------------------------------------------------------

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